Westpac nudges businesses towards Merchant Choice Routing

By Niko Iliakis ·
Fact Checked
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Customer making a contactless payment.

Westpac announced today that thousands of Australian businesses have not yet taken advantage of Merchant Choice Routing (MCR), and it will be taking a proactive role in helping merchants activate the service.

Over the coming months, Westpac will reach out to merchant customers who stand to benefit from MCR, and unless they opt against it, will switch them over.

Westpac chief executive business division, Guil Lima estimates that around 37,000 small businesses will be better off using the service.

“Westpac’s decision today will help merchant customers with Westpac owned terminals activate pricing that’s best for them, giving them one less thing to worry about at an already very challenging time,” he said.

What is Merchant Choice Routing?

In Australia, contactless payments are processed by one of three networks - eftpos, Mastercard, or Visa. Most debit cards are dual network cards, meaning they can be processed via the domestic eftpos network and the international Visa and Mastercard network.

When a customer inserts their debit card in a point-of-sale terminal, they can choose to route the transaction to the eftpos network (by selecting CHQ or SAV) or the international network (by selecting CR).

But when it comes to contactless payments, that choice disappears. Instead, transactions will often default to international networks, which typically charge higher merchant service fees (up to double those of eftpos).

Merchant Choice Routing - also known as least cost routing - gives merchants the ability to choose which network processes their business’ debit transactions. By selecting the cheapest one, merchants can see significant savings. 

How will businesses benefit?

Since April 2019, merchants operating on Westpac owned terminals have been able to opt in to the MCR service. However, confusion surrounding what it is and how it can benefit businesses has kept uptake low.

According to Lima, potential savings will depend on a few factors, including card mix, industry, transaction volume and size, and pricing plan. But even a small amount can go a long way in the current business climate.

"Every business will be different, for some customers it might mean savings of less than $100 per annum while others may save upwards of $1000,” he said.

“The impact of the pandemic on small business earnings and the potential for MCR to provide cost savings for merchants, is a key reason we are making this change now.”

“At the same time, there are a range of merchant transaction costs for businesses we are also working to simplify. Our goal is to make it easier for customers to understand their cost of acceptance and increase transparency.”

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